Apartments as percent of housing starts reaches 40-year high

Are Americans giving up on the idea of a home in the suburbs for good? That’s the question economists are asking after April data showing a boom in multi-unit housing starts.

The chart above shows that the share of housing starts consisting of five-or-more unit buildings was 39% — the highest since February 1974. That’s important for a number of reasons, notably that on a per-unit basis, the economy gets more of a boost from a single-family home being created than an apartment. The National Association of Home Builders estimates that the average single-family home creates three jobs vs. one for the average apartment.

Part of the gain in April was (groan) due to the weather — multi-unit starts jumped in the Northeast and Midwest. But many economists see something more fundamental going on beyond a catch-up in demand.

“The march to live on top of each other rather than next door with sufficiently sized side yards continues. There are any number of factors behind this move to closer quarters, baby boomers tired of paying for lawn care, the demand for shorter commutes, and young people with credit good enough to pay high rent but not quite so good to afford a down payment and qualify for a mortgage,” said Steve Blitz, chief economist of ITG Investment Research.

Here’s Ted Wieseman of Morgan Stanley:

This is a trend over time that we expect to continue, however, with tight mortgage credit availability likely to drive a historically disproportionate share of new household formations into rentals and support multi-family starts continuing to be a well above historically average share of starts.

And, in data through March, it’s clear these units are being built to support rental demand.

This is Jed Kolko, the chief economist at Trulia.

One economist thinks the trend won’t last.

“The recession has hit the young generation the hardest and they’re putting off big life steps such as getting married, buying a home and having kids,” said Danielle Hale, director of housing statistics at the National Association of Realtors at the association’s convention in Washington D.C. “Ultimately I think it’s a temporary phenomenon.”